Foreign investment and minimum wage policies have played a major role in increasing Regional Original Revenue (PAD) in Bali Province, according to a study published in the Indonesian Journal of Business Analytics. The research found that Foreign Direct Investment (FDI) and Regency/City Minimum Wage (UMK) policies had a positive and significant impact on Bali’s regional revenue during the 2020–2024 period. The study was conducted by Bagas Nurdianto and Wenny Restikasari from Universitas Negeri Surabaya, Indonesia.
The study highlights the importance of Regional Original Revenue as a key indicator of regional fiscal independence in Indonesia’s decentralization era. Bali, as one of Indonesia’s major economic centers heavily dependent on tourism, faces challenges related to economic vulnerability and the need for revenue diversification. In this context, investment flows and labor policies are considered strategic factors influencing regional fiscal capacity.
Research data showed that between 2020 and 2024, foreign investment in Bali increased from IDR 4.22 trillion to IDR 18.94 trillion. Domestic investment also rose from IDR 5.43 trillion to IDR 9.15 trillion during the same period. Meanwhile, Bali’s Regional Original Revenue increased significantly from IDR 3.06 trillion to IDR 6.86 trillion. According to the researchers, these trends indicate a strong relationship between investment growth, wage policies, and regional fiscal performance.
The study used a quantitative method with panel data regression analysis covering regencies and municipalities across Bali Province during 2020–2024. The Fixed Effect Model (FEM) was selected as the best analytical model based on Chow and Hausman test results.
The findings revealed several major conclusions:
- Foreign Direct Investment (FDI) had a positive and significant effect on Bali’s Regional Original Revenue.
- Regency/City Minimum Wage (UMK) policies also showed a positive and significant impact on PAD.
- Domestic Investment (DI) did not show a statistically significant effect on PAD.
- Simultaneously, FDI, DI, and UMK significantly influenced Regional Original Revenue in Bali Province.
In the partial analysis, a 1 percent increase in Foreign Direct Investment was estimated to increase PAD by 0.0771 percent. Meanwhile, a 1 percent increase in Regency/City Minimum Wage was estimated to increase PAD by 5.8956 percent. The researchers concluded that foreign investment and wage-driven purchasing power directly stimulate economic activity and regional tax revenues.
The study also found that Domestic Investment had not yet contributed significantly to Bali’s Regional Original Revenue. According to the researchers, this condition may occur because much domestic investment remains concentrated in sectors with relatively limited direct contributions to local tax income.
Bagas Nurdianto and Wenny Restikasari explained that foreign investment expands the regional economic base through job creation, increased production, and the growth of service sectors such as hotels, restaurants, tourism, and trade. These activities ultimately broaden the regional tax base and increase local government revenue.
Meanwhile, minimum wage policies were found to significantly affect public purchasing power. Higher wages stimulate household consumption and economic activity across multiple sectors, increasing revenue from hotel taxes, restaurant taxes, entertainment taxes, and other regional levies.
The study recommends that local governments continue improving the investment climate through simplified licensing systems, better infrastructure, and stronger regulatory certainty for both foreign and domestic investors. The researchers also emphasized that minimum wage policies should maintain a balance between worker welfare and business sustainability.
The findings are considered highly relevant for regional governments across Indonesia seeking to strengthen fiscal independence and increase regional revenue. Policies that encourage high-quality investment and balanced wage growth may help regions strengthen local economies while improving long-term fiscal capacity.
Author Profiles
- Bagas Nurdianto - Universitas Negeri Surabaya
- Wenny Restikasari - Universitas Negeri Surabaya
Research Source
Nurdianto, B., & Restikasari, W. (2026). The Influence of Foreign Investment, Domestic Investment, and District Minimum Wages on Regional Original Income in Bali Province. Indonesian Journal of Business Analytics (IJBA), Vol. 6 No. 2, April 2026, pp. 305–318.
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